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The Futurists Who Fathered The Ideas

February 07, 1993

Cover Story

THE FUTURISTS WHO FATHERED THE IDEAS

Like victory, every good idea boasts many fathers. So it is with the virtual corporation. These days, a whole cadre of management thinkers lays claim to the term, and to each of them it means something slightly different.

To Jan Hopland, a Digital Equipment Corp. executive who probably coined the phrase, it describes an enterprise that can marshal more resources than it currently has on its own, using collaborations both inside and outside its boundaries.

To Roger N. Nagel, a management guru who has crisscrossed the country giving about 50 presentations on the idea in the past 12 months, it largely means using technology to execute a wide array of temporary alliances with others in order to grasp specific market opportunities.

To William H. Davidow and Michael S. Malone, authors of The Virtual Corporation, the phrase is a catchall that encompasses a slew of management buzzwords and ideas from empowerment to just-in-time inventory techniques. Indeed, the pair have so broadened the term "virtual" that it virtually means "virtuous."

APOSTLES. Whatever the precise definition, all these business futurists, and several others, agree on one thing: The virtual corporation is the management model of tomorrow. With business becoming more global and more complex every day, many more partnerships are likely to emerge among companies and entrepreneurs.

In their collective view, today's joint ventures, strategic alliances, and outsourcing represent only the first trickle of what will become a torrent of spontaneous partnerships. These will be aided by high-speed communications networks, common standards for swapping design drawings and other work-in-progress, and informational data bases that will make it easier for companies to locate partners.

The virtual corporation's apostles are hardly shy about assessing the import of their notion. Nagel, operations director of Lehigh University's Iacocca Institute, believes that a company's desirability as a partner "will be a strategic requirement to remaining competitive." Davidow, a Silicon Valley venture capitalist, maintains that the U. S. "will be a post-industrial version of a developing country" if it fails to be a leader in forming virtual corporations by the year 2015.

Why virtual? The term has its origins in the computer industry--but not, as you might think, in the phrase "virtual reality." Instead, it derives from the early days of computing when the term "virtual memory" described a way of making a computer act as if it had more storage capacity than it really possessed. The virtual corporation will seem to be a single entity with vast capabilities but will really be the result of numerous collaborations assembled only when they're needed.

Hopland, who plots strategy for DEC's information-technology business, began using the term "virtual enterprise" about five years ago when he was a member of a B-school research team exploring management changes in the 1990s. "It was clear we were entering an age in which organizations would spring up overnight and would have to form and reform relationships to survive," says Hopland. " 'Virtual' had the technology metaphor. It was real, and it wasn't quite real."

Managers eager to learn about what's virtual and what isn't are unlikely to get much help from Davidow and Malone's book, published last October. The pair use the term so broadly that their book reads like anoverview of management trends--everything from customer focus to total quality management. No matter: Malone says he now fields calls from company chiefs who are so enthusiastic about the book that they want to transform their own organizations into virtual corporations.

STEREOTYPES. That will be easier said than done. Despite all the talk of how technology will facilitate the virtual corporation, there are some old-fashioned obstacles to overcome. For starters, changes in antitrust policy and intellectual-property laws may be necessary to spur cooperation among companies.

Those recommendations are among a series that emerged from a 1991 study by a task force at Lehigh co-chaired by Nagel and Richard K. Dove, an Oakland (Calif.) consultant. A former executive at International Harvester Co. and an expert in manufacturing systems, Nagel also maintains that executives will have to fight against a couple of "perniciousstereotypes."

The first of these is the tendency of managers to devalue work performed by outsiders. The second is the all-American notion that doing something alone is superior to doing it as part of a group. "Companies have to understand the value of sharing resources to make the idea work," says Nagel. For their part, Nagel and his fellow thinkers are generally happy to credit one another for their respective contributions. So here's one example, at least, of management gurus practicing what they preach. John A. Byrne in New York